In this blog post, I would like to examine some of the dichotomies in contract theory and doctrine that are noted in Professor Cunningham’s Contracts in the Real World. Some would claim that contract law is revolutionary; others would argue that it is reactionary. Compared to the status relationships of the Middle Ages, in which economic power was primarily determined through feudal or family relationships, contract and market relations promised a more egalitarian alternative.

In the classic text Ancient Law, Sir Henry Maine described the radical transformation from a feudal society governed by custom and hierarchy to one transformed by the industrial revolution, in which socio-economic mobility was not only possible, but which was expected. On the other hand, many today would argue that contract acts as a reactionary force, for enforcing bargains strictly as written could result in reinforcing the power imbalances that already exist in society.

Contracts in the Real World notes these dichotomies and strikes a middle ground between them. Prof. Cunningham characterizes the schism in contract law as a dispute between formalists and realists. This schism, he posits, applies even to foundational matters, such as the question of whether a contract has been formed. Prof. Cunningham notes that extreme formalists would champion a return to the days of the seal and enforce only those deals that meet the strict definitions of offer, acceptance, and consideration.

Realists, on the other hand, favor scrutinizing the context of every bargain, accepting the most informal of deals and even enforcing promises to make gifts as contracts. Thus the dichotomy between formalists and realists turns into a debate over the extent of government or court involvement in private ordering.

Throughout the book, Prof. Cunningham walks a tightrope between these positions, often making reference to contract law’s “sensible center,” and noting that with many common problems, the rules that have evolved over the years make a good deal of sense. In essence, he makes a case for the status quo, eschewing reform in either the direction of more government interference in contract, or government withdrawal from contract.

Prof. Cunningham suggests that current law strikes the proper balance between two rather extreme positions. The book extols the earthy pragmatism of old precedents and wise judges, and suggests that these doctrines will ultimately win out and reach a balance. In my next blog post, I will question whether this assertion holds true in the context of technological change.